Bixby v. St. Louis Union Trust Co.

• Decision Date: 04 October 1929
• Docket Number: 28011,28013
• Citation: 22 S.W.2d 813,323 Mo. 1014
• Parties: William K. Bixby, Trustee Under Will of William McMillan, v. St. Louis Union Trust Company et al.; St. Louis Union Trust Company, Executor of Will of William Northrup McMillan, Appellant. William K. Bixby, Trustee Under Will of William McMillan, v. St. Louis Union Trust Company et al.; Lucie McMillan, Appellant
• Court: Missouri Supreme Court

22 S.W.2d 813

323 Mo. 1014

William K. Bixby, Trustee Under Will of William McMillan, v. St. Louis Union Trust Company et al.; St. Louis Union Trust Company, Executor of Will of William Northrup McMillan, Appellant.

William K. Bixby, Trustee Under Will of William McMillan, v. St. Louis Union Trust Company et al.; Lucie McMillan, Appellant

Nos. 28011, 28013

Supreme Court of Missouri

October 4, 1929

Motion for Rehearing Overruled December 11, 1929.

Appeal from Circuit Court of City of St. Louis; Hon. Anthony F Ittner, Judge.

Reversed and remanded (with directions).

Sears Lehmann, Frank Y. Gladney, Clinton E. Bell and F. W. Lehmann for appellants.

(1) The will of William McMillan creates as to the beneficiaries for life a true "spendthrift trust." Kessner v Phillips, 189 Mo. 515; Nichols v. Eaton, 91 U.S. 716; Jones v. Harrison, 7 F.2d 461, 463; Broadway Bank v. Adams, 133 Mass. 170. (2) A "spendthrift trust" is valid under the laws of Missouri and will be enforced by this court in such a way as to best carry out the intent of the testator. Lampert v Haydel, 96 Mo. 439; Partridge v. Cavendar, 96 Mo. 452; Jarboe v. Hey, 122 Mo. 341; Maxwell v. Growney, 279 Mo. 113; Matthews v. Van Cleve, 282 Mo. 19; Lane v. Garrison, 293 Mo. 530; Graham v. Moore, 189 S.W. 1186. (3) The contract of October 6, 1913, between Eliza McMillan and Northrup McMillan was in violation of the terms of the will of William McMillan and was void ab initio. Authorities under Point 2. (4) The court's refusal to permit appellants to prove that on April 10, 1921 (on which date Northrup declined to make further payments), the estate of Eliza McMillan, by reason of payments made by Northrup, and of lapsation of legacies, had so increased that the trustees were able to carry out all the terms of her will without any additional payments under the agreement of October 6, 1913, was equivalent to proof of the fact. Currie v. Railroad, 52 N. J. L. 394. "The rule is imperative that where an offer of proof is made and rejected those things must be considered as true which the plaintiff in error offered to prove and was not permitted to prove." And so likewise: State v. Steifel, 106 Mo. 129; Rockefeller v. Merritt, 76 F. 914; First Nat. Bank v. Pelz, 176 Pa. St. 513.

Taylor, Chasnoff & Willson for respondents, St. Louis Union Trust Company and Wm. K. Bixby, Trustees of Estate of Eliza McMillan.

(1) The 1913 agreement does not contravene the restraints imposed or intended to be imposed by the will of William McMillan. The purpose of William McMillan was to prevent alienation or anticipation by Northrup McMillan of his equitable estate while in the hands of the trustees. It was not the intention to put any restraint upon such income as might actually come into Northrup McMillan's hands from the trustees. (a) The testator intended to prevent transfer (or agreement to transfer) of any right of the beneficiary against the trustee, i. e., any "interest in the trust estate." (b) There is a difference between a contract to pay and an assignment or transfer. Banholzer v. A. O. U. W., 119 Mo.App. 177; Christmas v. Russell, 14 Wall. (81 U.S.) 69, 20 L.Ed. 762. (c) The purported assignment of 1917 illustrates what the testator intended to prevent. (d) Restraint on "anticipation" only prevents recognition by trustees of an attempted alienation of principal or income and prevents trustees from prepaying income. 2 A. L. R. 1243, Annotation; 27 A. L. R. 1381, Annotation; Cahill v. Cahill, 8 App. Cas. 420; Hulme v. Tenant, 1 Bro. Ch. 16; Brandon v. Robinson, 18 Ves. Jun. 429. (e) It is presumed that a testator does not intend to impose any restraint on funds after payment to beneficiary. Wright v. Wright, 2 John & H. 647; Kruse v. Baeder, 1 O. D. (N. P.) 283, 31 Bull. 112, 1 Ohio S. & C. Pl. Dec. 283. (2) If William McMillan intended to impose a restraint upon alienation beyond preventing beneficiary from dealing with the right to receive the income from the hands of the trustee, such a limitation is against public policy and void. (a) The cases which sustain spendthrift trusts all contain language showing that the right protected is only that of the beneficiary to funds in the hands of the trustee. Lampert v. Haydel, 96. Mo. 439; Partridge v. Cavender, 96 Mo. 452; Broadway Nat. Bank v. Adams, 133 Mass. 170. (b) It is against public policy that a man should be prohibited from entering into contracts which affect no interest in a spendthrift trust and which only impose obligations on him, with reference to such property as may actually become his own. Tillinghast v. Bradford, 5 R. I. 205; Kessner v. Phillips, 189 Mo. 526; Gray, Restraints on Alienation, sec. 262.

Henwood, C. Davis, C., concurs; Cooley, C., not sitting.

OPINION

HENWOOD

This suit was filed by William K. Bixby, as a trustee under the will of William McMillan, to determine whether certain income of the William McMillan trust estate shall be paid to the estate of the testator's widow, Eliza McMillan, or the estate of his son, Northrup McMillan. The issues are issues of law only, involving the construction of William McMillan's will and the validity of a contract made by his widow and son. The trial court held that the contract is a valid one, and found and adjudged that, by virtue of the contract, the estate of Eliza McMillan is entitled to an escrow fund of $ 265,332.94 and accumulations thereof and the additional sum of $ 94,351.72. Separate appeals were taken by the St. Louis Union Trust Company, as executor of the will of Northrup McMillan, and Lucie McMillan, widow of Northrup McMillan, and, as above indicated, said appeals have been consolidated in this court.

The facts with which we are concerned, in the main, appear in connected form in the decree of the trial court. Omitting matters now immaterial, the decree reads as follows:

"The court having duly considered the issues and the evidence adduced, and being fully advised in the premises, doth accordingly find:

"II.

"That William McMillan died testate a resident and citizen of the State of Missouri on or about the 19th day of November, 1901 that his will was duly probated in the Probate Court of the City of St. Louis, Missouri, on or about the 23rd day of November, 1901; that by said will said testator, after providing for the payment of his debts, devised and bequeathed the residue of his said estate unto his wife, Eliza McMillan, their son William Northrup McMillan (who is and was sometimes known, and is sometimes hereinafter referred to, as Northrup McMillan) and the plaintiff William K. Bixby, and to the survivor or survivors of them, as trustees, for the equal benefit of said Eliza McMillan and said Northrup McMillan during their joint lives, and to pay over the entire net income from the trust created by said will (which trust is known as the 'William McMillan Trust Estate,' and is sometimes so referred to in this decree); that by said William McMillan will it was provided that in the event of the death of either said Eliza McMillan or said Northrup McMillan the entire income from said trust estate should be paid to the survivor of said Eliza McMillan and said Northrup McMillan, and that said William McMillan will also contained the following provision material to this suit:

"'The net income to be paid over in equal parts, share and share alike to my said wife, Eliza McMillan, and said son, William Northrup McMillan, in equal quarterly installments, free from interference or control of creditors, and I hereby declare it to be my intention that neither of said beneficiaries shall have the right to alienate, encumber or otherwise dispose of their respective interests in the trust estate hereby created, or any part thereof, or in any way anticipate or charge the income to be derived therefrom.'

"That said Eliza McMillan, said Northrup McMillan and the plaintiff were duly appointed executors under said will and with plaintiff became the trustees under said will, and that plaintiff is now the sole surviving trustee of said William McMillan trust estate.

"III.

"That on or about the 6th day of October, 1913, said Eliza McMillan and said Northrup McMillan entered into an agreement in writing, sometimes hereinafter referred to as the 1913 Agreement, which agreement is in words and figures as follows:

"'This Agreement, made this sixth day of October, 1913, by and between Eliza McMillan, of the city of St. Louis, and State of Missouri, party of the first part, and William Northrup McMillan, of the same place but now residing abroad, party of the second part, witnesseth: that,

"'Whereas, by his will dated the 23rd day of November, 1901, duly admitted to probate by the Probate Court of the said City of St. Louis, the late William McMillan devised and bequeathed all his residuary estate to the said Eliza McMillan, the said William Northrup McMillan and William K. Bixby, the latter also being of the city of St. Louis, as joint trustees, for the equal benefit of the parties of the first and second parts during their joint lives and for the sole benefit of the survivor of them during his or her life, with the proviso that if the said party of the second part shall leave any lineal descendant or descendants, the latter shall receive his share of said net income during the lifetime of the party of the first part; and,

"'Whereas, the party of the first part wishes to secure from the party of the second part, in the event he shall survive her, the use of one-quarter of the said net income for certain purposes to be set forth and declared in her last will; and,

"'Whereas the party of the second part wishes to secure from the party of the first part, in the event she shall survive him, the use and enjoyment by his wife, in the event the latter also...